Every set of statutory accounts must say how many people the company employed on average during the year. It is one of the few notes common to both micro-entity and small company accounts, and the only note Tax Optimiser switches on automatically.
What this note shows
The note gives the average number of persons employed by the company during the financial year. The Companies Act 2006 (s411) requires it, and it applies to micro-entities as well as small companies. In FRS 105 accounts it is one of the four notes under the balance sheet. In FRS 102 Section 1A accounts it sits in the main notes section, with the prior-year figure alongside.
The count includes directors who are employed by the company or hold office under a contract, and the printed wording says "including directors". A company whose only worker is its director usually reports 1, not 0.
"Average" generally means the monthly average: add up the number of people employed in each month and divide by the number of months. Count people, not full-time equivalents. Part-time staff each count as one.
Where the figures come from
- Current year: the period’s Number of Employees, which you set when you created the period or later in the period settings. The note shows it as Current Year Average Employees. If you change it in the note and save, the period’s figure is updated too. It is the same value either way.
- Prior year (FRS 102 Section 1A, where the period has comparatives that are not excluded): typed into Prior Year Average Employees in the note. It is not copied from last year’s period automatically, so enter the figure shown in last year’s accounts.
The figure is not taken from the trial balance or payroll. Check it against your payroll records.
Completing the note in Tax Optimiser
Go to View Accounts > Notes and select Average Employees under "Average number of employees". Show this note in the accounts is already set to Yes. Leave it on, because the note is required.
In FRS 102 Section 1A accounts with comparatives you see both years. The demo company employed 6 people this year and 5 last year:
In FRS 105 accounts, and in any period without comparatives, there is only the current-year box:
Zero employees. If the count is 0, the accounts show a warning asking you to check the employee count. If 0 is genuinely right (for example, a dormant or holding company whose directors have no service contracts and are not paid), tick Don’t warn me when the employee count is 0 to clear it. Think twice before using 0 when a director runs the business, because directors count.
There are no wording templates. The sentence is generated for you. Click Save changes to update the accounts.
How it appears in the accounts
The note prints as a single sentence. In FRS 102 Section 1A accounts with comparatives, the prior year follows in brackets:
In FRS 105 accounts it appears beneath the balance sheet with the current year only:
The note number depends on which other notes are switched on.
Frequently asked questions
Do directors count in the average number of employees?
Yes, where they are employed by the company or have a service contract. The printed note says "including directors". A one-person company run by its director normally reports 1.
Can the average number of employees be 0?
Yes, if nobody, including the directors, was employed, as with some dormant or holding companies. Tick Don’t warn me when the employee count is 0 to clear the validation warning.
How do I calculate the average number of employees?
Add the number of people employed in each month of the year and divide by the number of months. Count part-time staff as one each, not as full-time equivalents.
Do micro-entity accounts need the employee number?
Yes. The average number of employees is one of the notes micro-entities must give, printed beneath the balance sheet.
Why is last year’s figure blank?
The prior-year figure is typed into the note and is not copied over automatically. Enter the number from last year’s accounts in Prior Year Average Employees.